News / A long slow road to recovery for US trucking – some operators won't make it

© Chanat Warawattana

The recent cut in interest rates is not lifting the US trucking industry out of the doldrums – nevertheless, the sector is beginning to roll out of its long slog through depression, according to the latest DAT Truckload Volume Index.

However, recovery is going to be slow – with no significant improvement expected before next year – and some operators may not last the course.

The DAT Index, a monthly market snapshot based on the number of loads picked up, shows month-on-month decline across the truckload sector for September, from -2% in the flatbed segment to -7% in the van and refrigerated van categories.

Year on year, however, they are up: from 2% (flatbed); 6%+ (van); and 12% (reefer van).

The national average spot rate dropped three cents from August, which DAT Freight & Analytics attributes to lower fuel surcharges. Average linehaul rates have been flat, while contract rates still show sequential decline.

“September showed we’re firmly into a new freight cycle after nearly 22 months of rather extreme expansion and 27 months of contraction,” commented Ken Adamo, DAT chief of analytics. “We expect seasonality to provide some tailwinds over the next few months. Hopefully, modest improvements in rates, coupled with retail freight volumes and stable fuel prices, can get the motor carrier base on more solid footing.”

He cautioned that the recovery would likely be slow for some time before picking up momentum, noting that previous market shifts from decline to expansion had shown a similar pattern.

There are still considerable headwinds, pointed out American Trucking Associations (ATA) chief economist Bob Costello. The US economy has slowed, with the manufacturing sector a major drag, he noted. The Institute for Supply Management’s manufacturing PMI remained in contraction in September, with a reading of 47.2 (a value below 50 indicates decline). At 46.1, the new orders component is indicating continuing weakness.

“One of the reasons freight hasn’t recovered as much is because private fleets have taken some of the share,” said Mr Costello. Increasingly Amazon, Walmart and other large retailers have been offering their networks to third-party sellers to boost utilisation rates and offset costs.

Mr Costello expects further interest rate cuts, which will help, but the 0.5% reduction in September – the Fed’s first cut in four years – is not going to have an impact on trucking demand and rates in Q4, according to DAT. It predicts truckload rates will remain “stuck to the bottom” in a market defined by low demand and excess capacity.

“Looking ahead to Q4, the truckload rate per mile index is expected to stay near the floor established six quarters ago, rising slightly from 4.6% in Q3 to 4.9% above the 2018 baseline,” DAT predicted.

For some truckers, the recovery will not build up enough momentum as the industry continues to struggle with a toxic brew of low demand and high costs, noted Mr Costello.

“I think supply is coming out, but there’s got to be more and I think more will be coming, even if freight picks up a little bit,” he said.